Irish-backed UK pub giant Mitchells & Butlers said on Tuesday that it has secured significant temporary relief from its banks to get through its closure during the coronavirus lockdown.
The Birmingham-based company, in which Irish horse-racing magnates JP McManus and John Magnier hold a combined 23.5 per cent stake, said that its banks have granted it a waiver until May 15t, of a debt service covenant test.
Failure of such a test would result in a technical debt default. Discussions are ongoing with its lenders.
The owner of 1,748 pubs, bars and restaurants under a number of brand names, including All Bar One, O’Neill’s and Ember Inns, has put 99 per cent of its workforce on leave as its outlets have been closed for more than three weeks.
"It is helpful to hear that the group has re-negotiated a short-term waiver pending further discussions, and that costs have been brought under control quickly," said Paul Ruddy, an analyst with Goodbody Stockbrokers.
“Management notes that its cash resources will fund it well into the second half of the year. Although today’s update does not include a waiver for the year-end covenant test, we highlight that the group had £4 billion (€4.6bn) of land and buildings, with £1.7 billion of total debt at [its] last year-end, which should put the group in a good negotiating position.”
Slump in sales
Last month Mitchells & Butlers warned that it “could suffer a significant loss” in the four weeks before it is due to have its covenants tested as the spread of Covid-19 is set to lead to a slump in sales.
That warning predated a general UK lockdown, and came at a time when Boris Johnson’s government was merely recommending that people avoid pubs and restaurants. It remains uncertain when restrictions will be eased.
The FTSE-250 listed company said on Tuesday that it was in “close contact” with other stakeholders, who are supportive of the business.
“The group has material cash resources which we believe should be sufficient to fund obligations well into the second half of the year,” it said.